The Third Way – Myth

by Ralph T. Niemeyer

It is hardly possible for any democratically elected leader to stand up against their power and it is impossible for any smaller competitor to win a market share even though the product is more innovative or the underlying business idea much better because banks are hardly financing any SMEs but only their own gambling.

In Germany, it would be less than 200 companies which needed to be led into public ownership as they are too big to be administrated in a good way when private profit maximization dreams dominate the agenda. The owners of those majors in most cases have inherited their shares anyhow and in almost all cases don’t even work in the management of the company but derive their wealth from the work of others.

Since these major corporations have continuously received public funds in form of subsidies also from Brussels one should simply turn such taxpayer’s money into shares of the relevant company.

The usual argument against public ownership that neo-liberals bring into play is that a publicly owned company was less efficient and less profitable than a private one. That is bullocks and does in no way stand up empirical studies.

First of all, a publicly owned company is free from the chains of producing profit that feeds some rich heir that never worked for the company. In this sense, a publicly owned company will always have more resources available and for this reason be much better prepared for innovation and re-investment than a privately owned company that additionally to it’s operational costs needs to produce a profit that is being distributed to shareholders and rich family-clans.

Adam Smith and John Locke would turn in their graves if they could see how major corporations today operate and fail to invest into new technologies. What both instead would certainly like to see is a modern economy-democracy in which the employees control production and investments in a way that the Czech economist Ota Sik envisioned in 1979.

According to Ota Sik “the corporation is not for the shareholder but for the employee a living social institution” for which he developed the model of a continuous neutralisation of share-capital by transferring all additionally accumulated production capital into a foundation owned by the employees of the company as the ownership of a company is defined by the continuing accumulation of innovative production capacity and results derived from such.

The foundation and it’s capital shall not individually be liquidized or sold. This is highly beneficial for the company as it is under no pressure to pay dividends or please shareholders by distributing profits but can use the accumulated wealth for innovation and re-investment within the company.

And, the benefit for the employees lays in the fact that they participate in the vital decisions of the company. This concept is much different from the usual practice by which major corporations ever since threw a hand full of shares at their employees instead of wage increases or social rights and which were never significant enough to make a relevant difference to the ownership structure of the company.

Under this predicament of either public or (the third way) economic-democratic ownership no shareholder value needs to be created as neither public hand (ultimately the taxpayer) nor the employees (including the top management of the company) would plunder the company’s assets and not re-invest in the best interest of the company because it would simply not be possible.

No private equity – shark or hedge fund – junky could make fortune on the back of employees and production capacity of the company. And, no heir would be able to sit on the sun roof zipping away champagne without working.

After all, this concept is the only solution to ever establish a truly free market as only such company will be successful in the long term that is innovative and re-invests into new technologies, ecologically sound and beneficial to society.

The motivation for management as well as workers to stretch to the ceiling and work better couldn’t be greater than by providing for a safe and socially just working environment with fair, productivity-orientated, remuneration. All of which our present economic system does not provide for.

The US – American sociologist and 1978 – Nobel Prize laureate Hermann Simon has empirically proven that the differences in competitiveness between privately and publicly owned companies were less grave than always maintained since most producers are employees and not the owners of a company and according to the classical theory have no reason to maximize the profit share of a company unless being controlled and forced by the owners to do that. Controlling a public company in that way is even easier than a private one as an audit by the state will always be more stringent than that of a private entity being paid by the owners themselves.

Nobel laureate Hermann Simon made it absolutely clear in his book ‘Hidden Champions’ that “the phenomenon of the success of the ‘hidden champions’ are not primarily questions over the ownership by family clans but that over the strategy and leadership of a company”.

Strategy and leadership of a company has to orientate itself on economically meaningful goals for which incentives will have to create the right motivation among all employees, workers as well as management.

There are no guarantees but the likelihood that the right priorities are put forward by a publicly owned or economic-democratically controlled company is much higher than it presently is by any privately owned, stock market listed, major corporation that is feeding heirs of family clans rather than putting profit generated back to work.

Europe after the financial capitalism will have to revisit the issue of ownership for the sake of a truly free market and ecologically sound economic system that serves all people.